iQ Domestic Income Model
Investment Objective
The iQ Domestic Income Model is designed for investors who want their portfolio working for them every month. Income comes first — capital appreciation is a welcome bonus, not the primary goal. The strategy achieves this by systematically selecting the most compelling closed-end and exchange-traded funds from across the domestic fixed income landscape, covering everything from municipal debt and investment grade bonds to high yield, U.S. government securities, mortgages, and inflation-protected instruments. The Model rebalances every February, May, August and November.
Investment Process
1. Universe Construction
The eligible universe is restricted to domestic bond ETFs and closed-end funds.
2. Liquidity Filter
Candidates must rank in the top 100 by dollar volume, ensuring only actively traded ETFs with sufficient market depth proceed.
3. Momentum Filters
Survivors are sequentially narrowed by two momentum measures — first to the top 80 by 6-period excess return score, then further to the top 40 by 6-period relative strength — confirming both absolute and relative near-term return strength.
4. Oversold Filter
From the momentum-confirmed candidates, the screen selects the bottom 10 by 24-period RSI, deliberately targeting ETFs that are technically oversold despite showing positive momentum — a classic contrarian entry signal.
5. Final Ranking & Selection
The oversold candidates are ranked by dividend yield and the top five are selected, ensuring the final holdings combine contrarian entry timing with maximum income generation.
Potential Benefits
Contrarian Entry Discipline By requiring positive momentum alongside an oversold RSI reading, the model targets ETFs that are temporarily depressed within a broader uptrend — a powerful combination that seeks to capture mean reversion while avoiding assets in genuine structural decline. This dual confirmation reduces the risk of catching a falling knife.
Income Enhancement Through Timing Ranking oversold candidates by yield means the portfolio systematically buys income-generating assets when their prices are suppressed — mechanically capturing higher yields than would be available at full valuation. This timing discipline compounds the income benefit over multiple cycles.
Multi-Asset Diversification Within a Focused Universe Operating across tail risk, fixed income, high yield, currency, and dollar strategies means the model can rotate across meaningfully different risk exposures depending on which assets simultaneously satisfy the momentum and oversold criteria.
Potential Risks:
Momentum-Contrarian Tension: The requirement for both positive momentum and oversold RSI at times may be difficult to satisfy consistently. In trending markets these two conditions may not co-exist, potentially leaving the strategy with fewer qualifying candidates for extended periods. Yield Distortion Risk: Elevated yields in ETFs — particularly high yield and multi-sector fixed income — can reflect genuine credit stress or structural deterioration rather than attractive valuation. Selecting for the highest yield among an already distressed oversold set risks systematically favoring the most impaired assets.